Can Japan ETFs Keep Climbing in 2024?

Neena Mishra
·2-min read

Japan’s Nikkei 225 index has surged about 9% this month, after a 28% gain in 2023. Currency-hedged Japan ETFs, which neutralize the fluctuations of the Japanese yen, are up more than 45% over the past year.

A combination of factors contributed to the rally. Last year, Warren Buffett's Berkshire Hathaway (BRK.B) increased its stake in Japan's five largest trading houses. Buffett said that he likes these stocks for their earnings yields and dividends.

Global money managers now view Japan as a much more attractive investment destination than China. Chinese individual investors are also piling into Japanese shares.

The government has incentivized companies to improve corporate governance and use their capital efficiently. We have seen significant improvements in dividends and share buybacks, as well as the unwinding of cross-shareholdings in recent years.

Despite the recent surge, Japanese stocks remain attractively valued, particularly compared to US stocks. At the same time, the earnings and economic outlook remain positive.

The government is spending billions to attract semiconductor giants like Taiwan Semiconductor Manufacturing TSM as it tries to regain its status as a major semiconductor power amid rising tensions.

The Bank of Japan has retained its ultralow interest rates while most of its peers raised rates aggressively last year, as inflation remains low compared with other developed countries. As a result, the yen has plunged against the dollar.

The decline in the currency boosts sales and profits for Japanese exporters. Furthermore, due to the strength of the dollar, currency-hedged ETFs have significantly outperformed unhedged Japan funds as well as the S&P 500 index.

The WisdomTree Japan Hedged Equity Fund DXJ holds dividend paying exporters. Well-known companies like Toyota Motor TM and Mitsubishi Financial Group MUFG are its top holdings.

To learn more about DXJ, the Franklin FTSE Japan Hedged ETF FLJH and the JPMorgan BetaBuilders Japan ETF BBJP, please watch the short video above.

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Toyota Motor Corporation (TM) : Free Stock Analysis Report

Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report

Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report

WisdomTree Japan Hedged Equity ETF (DXJ): ETF Research Reports

Franklin FTSE Japan Hedged ETF (FLJH): ETF Research Reports

Mitsubishi UFJ Financial Group, Inc. (MUFG) : Free Stock Analysis Report

JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports

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